Oracle targets online marketplace

CBS.MarketWatch.com

SAN FRANCISCO (CBS.MW) -- Armed with a quiver of sharp barbs, Oracle chief executive Larry Ellison is looking to shoot down some of the high-flying online marketplaces and claim some of the business for his own software giant.

"I've never understood how Commerce One can have this huge (market) valuation when transactional fees will approach zero," Ellison told analysts during his speech at Oracle's analyst day. "It took us, what, 70 days to build auction software? It ain't hard."

Ellison's comments echoed thoughts from Prudential Securities analyst Doug Crook, who slashed his rating last Friday on the suppliers of online marketplaces, including I2
"
Commerce One
cmrc
and Ariba
arba

"These companies have run to unprecedented levels, in my experience, based upon the perception that they will enjoy royalties in the future based upon transactions going across trade exchanges," Crook said in a research note. But he added competition has appeared sooner than expected, as vendors rush to market with their own trade exchange capabilities. See related story.

Trade exchanges are en vogue these days as easier, cheaper ways businesses to buy and sell things. Several huge manufacturing sectors -- the auto, paper and pulp and chemical industries among others -- have announced plans to run Web auctions to buy supplies and do other deals.

Of course, not all analysts share the bearishness on Commerce One and Ariba. Several Wall Streeters rallied to defend both stocks, which have dropped sharply over the past month.

Dain Rauscher Wessels on Wednesday called Ariba its "best idea" for investments, citing the company's stronger-than-expected first-quarter revenue. Commerce One is set to meet with analysts on Thursday.

Though it started out selling databases, Oracle
ORCL, +0.10%
has continually broadened its product line. The completeness of the offering -- combined with the fact that all the applications work together -- remains a major selling point for the company, Ellison said.

In addition to selling software that runs online exchanges, Oracle is also bumping up the profile of its Oracle Exchange, which it bills as "an EBay for corporations." Business can register at the Web site and then buy and sell items online.

Oracle has gone after a number of hot sectors in recent months, pushing software that automates supply chain management, email campaigns, sales force paperwork and procurement among other areas. In doing so, Oracle has gone after Siebel Systems
sebl
I2 and E.piphany
epny
-- all companies that sport multi-billion-dollar market caps.

But at least one money manager, who asked not to be named, said he didn't expect Oracle to knock off the smaller rivals, at least immediately.

"Oracle can't touch these companies as long as the market remains red hot," the money manager said. But if the market cools, Oracle would be able to weather the downturn because it sells a number of different products.

He pointed to the fact that Oracle has outlasted other database providers, such as Sybase
SYBS, +1.97%
and Informix
ifmx
as well as makers of business software makers, including Baan
baanf
and PeopleSoft
PSFT, +15.79%
"Oracle didn't really kill them off, the market killed them off," the money manager said.

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